Councilors question TIF deal for Worcester hotel

A tax-relief deal for a proposed 100-room Hampton Inn and Suites hotel north of Lincoln Square has encountered flak from some city councilors who have raised questions about its need.

The councilors expressed concerns Tuesday night about whether the hotel developer needs any kind of tax relief from the city to make the project work given that the hotel occupancy rate in the city is currently running at about 75 percent and there is a need for more hotel rooms.

Some also voiced disappointment that many of the new jobs to be created at the hotel would pay less than $20,000 a year.

Councilor-at-Large Joseph C. O’Brien compared the low pay to what employees in fast-food restaurants make and he wondered whether that was worth having the city give up slightly more than $1 million in property taxes.

The so-called TIF plan would provide the developer, SXC Prescott Street Hotel LLC, with an estimated property tax savings of slightly more than $1 million. The savings would be available to the developer to help finance the construction of the hotel, which is estimated at $11.1 million.

The project will create 30 permanent full-time jobs and provide much-need hotel space in the city.

During the life of the TIF, the city would receive an estimated $1.4 million in tax revenues from the hotel. Upon completion of the TIF, the city would get an estimated $377,442 in tax revenues annually, said Timothy J. McGourthy chief development officer for the city.

The city manager’s recommendation will go before the council’s Economic Development Committee for a public hearing next Tuesday night.

Councilor-at-Large Frederick C. Rushton, committee chairman, said he was “a little skeptical” about the need for a TIF.

He said he feels the hotel developer will really have to make a demonstrative need for a $1 million tax savings, especially given the need for more hotel rooms in the city.

“They’re going to be making a lot of money and I’ve got to actually see why they need $1 million in tax savings,” Mr. Rushton said. “What is their actual need as opposed to what they want. I’m not ruling this out, but I will have to see a demonstrative need for this kind of tax break.”

District 3 Councilor George J. Russell also expressed concern about the project and wondered whether it would be profitable without a TIF.

He also questioned whether the hotel would work against the city’s efforts to get a world class, full-service hotel in the downtown.

But the city manager said even though the city’s hotel occupancy rate is a solid 75 percent, he pointed out that room rates in Worcester are suppressed compared to other larger cities because higher rates would not work here.

“The market is what it is,” Mr. O’Brien said. “When you have a suppressed market like this it requires subsidies. The economy onto itself is not going to do it.”

Mayor Joseph M. Petty and Councilors-at-Large Kathleen M. Toomey and Michael J. Germain said the City Council should be encouraging the hotel development.

Ms. Toomey pointed out that the city lost 243 rooms when the Crowne Plaza hotel closed a couple of years ago. Even with this hotel, she said the city would still be down 143 rooms since then.

“Let’s not try to be myopic on this issue,” she said. “Let’s take a look at beyond the scope of jobs at the hotel. Let’s look at the jobs that are going to be created in the downtown because of this. We need new hotel rooms in the downtown. We should be entertaining all suggestions.”

Mr. Petty said the TIF proposal warrants the close scrutiny of the Economic Development Committee. He added that the city has “pretty good momentum” these days and the council should do what it can to keep it going.

Mr. Germain echoed that sentiment, saying the hotel development is not just about a TIF or taxes.

“The city needs another hotel,” he said. “People come to this city but they can’t stay here because there aren’t enough hotel rooms. The pendulum is swinging our way, why stop it? Why stop that momentum? The only thing the council can do is to stop this momentum.”

The hotel will be built on a 39,277-square-foot parcel bounded by Salisbury Street to the south and Prescott Street to the east.